ITT Educational Services and Colleges and Universities and Education Finance and Education Business and Education & Workforce Development

Senator to probe spending at for-profit colleges

June 10, 2010

Sen. Tom Harkin, chairman of the Health, Education, Labor and Pensions Committee, said he plans to hold hearings to examine the surge in federal grants and loans flowing to for-profit colleges in the U.S.

The committee will probe the “rapid growth of federal investment” in the industry and “the corresponding opportunities and risks for students and taxpayers,” Harkin, an Iowa Democrat, said in a statement Thursday on his website.

Apollo Group Inc.’s University of Phoenix, ITT Educational Services Inc., Career Education Corp. and other for-profit educators are under increasing federal scrutiny over their recruitment practices and the level of student loan defaults. President Barack Obama’s administration is proposing tougher regulation of the companies because of concern that recruiters are signing up unqualified students and leaving them with loans they may be unable to repay. For-profit colleges receive more than $20 billion a year in federal student grants and loans, Harkin said in his statement. The hearings are scheduled to begin June 24 in Washington.

“We need to ensure for-profit colleges are working well to meet the needs of students and not just shareholders,” Harkin said. “We owe it to students and taxpayers to make sure these dollars are being well spent.”

The number of students attending for-profit colleges in the U.S. rose to 1.8 million in 2008, from 550,000 in 1998, according to Harkin’s statement. One in five students who left a for-profit college in 2007 defaulted on the loan within three years, Harkin said, citing U.S. Department of Education statistics.

For-profit institutions are making advances in postsecondary education, said Harris Miller, president of the Washington-based Career College Association, which represents more than 1,400 for-profit colleges, in a statement today.

“These hearings will give our inclusive educational institutions an opportunity to address myths with facts and figures.”

For-profit colleges cater to lower-income and minority students, and higher default rates reflect graduates’ socioeconomic backgrounds rather than the colleges the students attend, according to a study released April 2 by the industry association.

The for-profit colleges are lobbying against the Education Department’s proposed rule changes, which are expected to be issued for public comment as soon as next week. The regulations would cut federal aid to for-profit colleges whose students have starting salaries that make it difficult to repay their federal loans. The government would also tighten restrictions on tying recruiters’ pay to the number of students enrolled.

 

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